Ask Jane: How do I start an Individual Retirement Account?

Employers don’t hand out IRAs on a silver platter, the way they hand out 401(k)s. You have to take the initiative to start one yourself. That’s why so many people who qualify for IRAs don’t have them — they haven’t gotten around to it.

It’s time to break out of this holding pattern. If IRAs are your only available retirement plan, your future (older) self will look back on these years and regret that you weren’t putting money away.

You’re eligible for an IRA if you have earnings. There’s also a “spousal IRA,” for people who aren’t working but are married to someone with a paycheck. You can even start an IRA if you’re covered by an employer plan at work, but might not be allowed to make the full contribution.

You’re allowed to put away, on a tax-favored basis, up to $5,000 a year ($6,000, if you’re 50 and older).

IRAs are offered by many types of financial institutions —mutual fund groups, brokerage houses and banks with brokerage house affiliates. The lowest-cost IRAs are available not from salespeople, but from fund groups that levy no sales charges (called “no load” funds).

The granddaddy of no-loads is the Vanguard Group. You not only pay no sales charges, you get the widest range of low-cost IRA investments. My two favorites types: (1) the Total Stock Market Index funds — following all the U.S. stocks, or all the international stocks; and (2) Target-date funds (funds high in stocks when you’re young, with bonds added to the portfolio as you age). The minimum initial investment: $3,000 for the index funds and $1,000 for the target funds.

The two other big no-load companies with IRAs are T. Rowe Price and Fidelity Investments. Both groups offer index funds. They also have target-date funds (called Retirement Funds at T. Rowe Price and Freedom Funds at Fidelity).

T. Rowe Price is especially friendly to investment beginners. You can start an IRA for as little at $1,000 (in a lump sum) or $100 a month taken automatically from your bank account. Fidelity requires a $2,500 minimum for target funds and $10,000 for its Spartan index funds.

If you choose a traditional IRA, your contribution is tax deductible and your investments grow tax deferred. You pay income taxes when you retire and take the money out. If you choose a Roth IRA, you get no tax deduction but the money grows tax free.

To start an IRA with a no-load fund group, go to its website. You’ll lots more information there about how IRAs work, and can open an account online. Or, go to a financial adviser. You pay higher fees for adviser-sold IRAs, but if that’s what it takes to get you started, do it.

Jane Bryant Quinn is a nationally known commentator on personal finance, with books and columns read and trusted by millions. In her long career, she has established herself as America’s most reliable voice for people trying to manage their money well. Read more of Jane's articles here.